Subject: File Number S7-06-08 (Form ADV Part 2)

May 12, 2008

SEC Proposed Amendment to Form ADV Part 2:

While I applaud the effort to more efficiently and effectively communicate information to advisory clients and proposed clients, there are a number of proposed changes to Form ADV Part 2 that need further scrutiny prior to implementing changes. Those areas are as follows (in order as proposed for Part 2A):

Item Number 4 (Advisory Business)

The proposed amendment would require advisers to describe its advisory business in detail including any specializing in a particular service and the amount of client assets that it manages. While "plain language" is the goal, advisers will most likely need to seek the advice of legal council to create language that is not ambiguous or left for interpretation. As an adviser, we do not want to be held responsible for language that is or could be misinterpreted. Thus, it creates the need for more language to be included to clarify certain activities including specializations that our firm engages in. More "legal" language is not the goal of the proposed amendment, however it would be the result. This would create a much longer discloser (and higher legal costs to the adviser) that clients would become less likely to read. The proposed amendment would provide for the "plain language" to be made in a free form or undisciplined format. When comparing two advisers, there is on continuity for clients to make an evaluation from. If better disclosure is the goal, then a format based on continuity must be adhered to for the client to make an educated decision.

Next, the requirement to disclose the amount of assets under management in the brochure would be discriminatory. Smaller firms may lose prospective clients to larger firms because of the perceived notion that a company with a larger number of assets under management does a better job than a company with a smaller amount of assets under management. Part 1 already requires this information. What exactly is the material information or message that is to be conveyed to a prospective client and can it potentially hurt the smaller adviser? The amount of AUM has no bearing on the quality of business or the integrity of the adviser. There are "bad" advisers giving "bad" advice with large numbers of AUM! Also, large brokerage firms with advisory divisions have large pools of IARs to solicit billions of AUM for the corporate Investment Advisers. This is an unfair comparison to the small adviser who manages 10, 20 or even 50 million in AUM. Please remove the requirement of disclosing assets under management from the proposal. Ask yourselves, are you creating more language in an undisciplined format and will the client be more or less likely to read it?

Item Number 9 (Disciplinary Information)

Including disciplinary information in the brochure, may bias an otherwise good adviser. Based on statistics from NASD.com (now FINRA) 70% of arbitration cases filed resulted in an award or settlement. Compliance and legal departments suggest this is primarily because it is easier and less costly for the matter to be settled than to go through the hearing process. It has no bearing on the ethical behavior of the adviser, it is a cost issue. Also, more than 50% of the cases in 2006 that actually where tried through hearing resulted in no award to the plaintiff (client). That statistic was 58% for 2006. Also, in an arbitration, the mentality is that an adviser is guilty until proven innocent. Cases may be pending for years and/or not result in a award. Should an adviser be required to disclose this information in the brochure which may unduly bias clients toward that adviser. Disciplinary information is already disclosed in Part 1 available to the client through the website.

Item Number 18 (Financial Information)

Again, this information could unduly discriminate against the smaller adviser. Large Brokerage firms with Corporate Investment Adviser divisions will have financials that rival city and state budgets, while small firms will have meager financials in comparison. As long as an adviser maintains its state required capital requirements, and/or E & O policies, financial information on the adviser should have no relevance as to the type of work, advice or integrity an adviser possesses and provides. Giving a client an audited (more cost to the adviser) balance sheet has no relevance on the collection of prepayment of fees. Would this also extend to fees for Assets under Management that are collected at the beginning of a calendar quarter as opposed to being collected in arrears? Some compliance departments have policies about collecting fees in arrears. They feel that this is likened to sharing in the profits of client accounts and require advisers to collect fees in advance. Does giving a client a balance sheet instill confidence that the adviser is doing a good job, or does it just reward large adviser firms?

Item Number 19 (Index)

This is redundant information creating more work, cost and bulk to an already confusing brochure. If you have a table of contents, you don't need an index as well.

The requirement to send annually the hard copy of the Brochure would create an additional cost to the adviser. The amendment should allow for the brochure to be available to the client (as the annual offer is now) and then it should be available via PDF documents as well as hard copy to any client who wishes. A better proposal is to send an annual offer stating that "material information has changed", and let the client decide if they want the new copy.

As a smaller adviser, we feel that we would be disadvantaged and discriminated against by the proposed amendment to Form ADV Part 2. Lack of structure, additional costs, biased information such as AUM and financials all favor larger corporate advisers and make the smaller adviser pale in comparison. While smaller advisers (up to $25 Million in AUM) are regulated at the State level, the Form ADV is used universally across all advisers. Smaller advisers should have the right to operate in an equal environment to the larger advisers, and these amendments will destroy the small adviser.

In addition, FSI (Financial Services Institute) has suggested the following areas of concern:
Effective Disclosure - While we understand and appreciate the SEC’s goal of providing clients with current and meaningful disclosure, the Proposed Amendment seems at odds with the findings of the RAND Study and the SEC’s recent Summary Prospectus proposal. The results of the RAND Study clearly indicate that detailed disclosure documents do not aid retail clients in their understanding of their investments and advisory relationships. In its Summary Prospectus proposal the SEC itself acknowledges that consumers of investment products want short, concise disclosure documents. Unfortunately, the Proposed Amendment does not put these lessons into practice. Instead, it creates a long and detailed disclosure document that will likely go unread by many advisory clients who will be intimidated by its bulk. FSI believes the SEC should present their draft Form ADV Part 2 disclosures to focus groups made up of retail investors to test their effectiveness. We believe these efforts will reveal substantial opportunities to improve the Proposed Amendment and create a more effective disclosure document.

Frequent Trading – Item 8 of Part 2A would require the Brochure to include specific disclosures if an adviser engages in “frequent trading.” However, the SEC fails to define the term, stating that the lack of definition will provide advisers flexibility. We believe either a definition must be provided by the SEC or the specific disclosure requirement should be eliminated. After all, if the SEC itself cannot define the term “frequent trading” then it is manifestly unfair for them to sanction firms whose definition is later determined to fall short.

Substantial Income or Time – Item 4 of Part 2B would require a supervised person who engages in non-investment-related business activities that provide a substantial source of their income or that involve a substantial amount of their time to disclose this information in their Supplement. The SEC, however, does not define the term “substantial.” The SEC states that they “prefer instead to leave some flexibility for advisers” to determine if the activity is a substantial source of income or demand on the supervised person’s time. We believe the SEC should define the terms “substantial source of income” and “substantial amount of time” by establishing uniform definable percentages for each. We believe this approach will provide advisers with the regulatory certainty they need to prepare the Supplement with confidence.

Annual Mailing of Part 2 – The SEC indicates that delivering an updated Brochure annually to clients will create an annual burden of 253.25 hours per advisor. However, most investment advisers report that clients do not want and will not read an annual updated Brochure. As a result, we suggest that advisers be required annually to inform their clients of their right to obtain a hard copy Brochure and/or to access the Brochure and any amendments electronically through the IARD system. If the SEC insists upon an annual mailing, we suggest that the mailing consist of a summary of material changes together with information on how clients may obtain a hard copy Brochure via the IARD or by contacting the adviser.

Requiring the Use of XBRL – In the Proposed Amendment, the SEC asks for comments about whether they should require advisers to file brochure information using XBRL. XBRL is a language for electronic communications of business and financial data that allows for the tagging of data to facilitate the preparation, publication, and analysis of that information by software applications. We oppose the SEC mandating the use of XBRL because we believe this requirement would be too costly for smaller investment advisory firms and of limited benefit to their clients.